Standard & Poor’s cut from AA- to A+ public sector covered bonds issued by Erste Europäische Pfandbrief- und Kommunalkreditbank (EEPK) on Friday after having downgraded the issuer’s parent, Commerzbank.

S&P cut Commerzbank from A to A- on Wednesday because it considers that the bank will need more time to restructure its “unbalanced” business model.

The downgrade of EEPK’s lettres de gage is a direct consequence of the negative rating action on Commerzbank, as the overcollateralisation of the covered bonds does not support the highest potential uplift above the issuer credit rating, according to S&P.

The ratings of the Luxembourg issuer’s covered bonds were removed from CreditWatch negative. The outlook is negative.

Neither Pfandbriefe issued by Hypothekenbank Frankfurt, the former Eurohypo, nor SME covered bonds issued by Commerzbank are rated by S&P.